Harist Corporation sold 5,000 units in May. Sales were $400,000, variable expenses were $240,000, and fixed expenses were $120,000. If the company increases its selling price by 10%, how many units would have to be sold in June to generate a profit of $40,000?

Question

Quizplus · Accepted Answer

To find the number of units needed to generate a $40,000 profit, first calculate the new selling price per unit: $400,000 / 5,000 units = $80 per unit. With a 10% increase, the new price is $88 per unit. The contribution margin per unit is $88 - ($240,000 / 5,000) = $40. To cover fixed expenses and achieve a $40,000 profit, the equation is: $40x = $120,000 + $40,000. Solving for x gives 4,000 units.

Harist Corporation Sold 5,000 Units in May